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You own a small company that already produced 600 Quick Guide to Business Terms. booklets. Production of these 600 booklets resulted in a total cost
You own a small company that already produced 600 "Quick Guide to Business Terms". booklets. Production of these 600 booklets resulted in a total cost of $3,000. You plan to sell them for $14each. You fully expect to be able tosell all of the booklets that you produced at the regular selling price of $14 each. A community college has offered to buy 250 ofthese booklets and pay you (see below for the amount paid to you for each, instead of $14 each) if you process further by adding a special cover with the college logo on it. |
Your additional cost of adding the special college logo cover to 250 booklets would be $1,700. |
This is a one-time offer only and would not grow into a future, larger repeat business, and there are no other relevant issues. |
Thus, yourdecision is whether to accept the community college offer and process further...or not! |
Price that the community college has offered to pay for each booklet is $19.60 |
According to Managerial Accounting: |
A)Is the $3,000 cost to print the 600 booklets relevant toTHIS decision? (YES or NO) and explain why or why not. |
B) Should you accept the community college offer and process further? (YES or NO?) SHOW CALCULATIONS and a clearly identified differential in net income that would result from accepting the offer (do NOT make reviewer, i.e., instructor) hunt for it!). (hint: consider using an easy-to-follow differential analysis approach) |
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